6 Different Pricing Strategies: Which Is Right for Your Business?
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Used by a wide range of businesses including generic food suppliers, commodity traders and discount retailers, economy pricing aims to attract the most price-conscious of consumers. Businesses using this strategy should be well positioned for cost savings and higher sales volumes.
Premium pricing is the practice of setting the price of products or service artificially high. Premium pricing is often most effective in the early days of a product’s life cycle, and ideal for small businesses that sell unique goods.
Bundle pricing is a strategy to sell multiple similar products packaged together at reduced price. This is an effective way of moving unsold items that are taking up space, but it can also increase the value perception in the eyes of the customer and increase the average sale value.
Bundle pricing is more effective for companies that sell complimentary products. A printer can offer business cards, flyers and a banner as a package as these items are often used by the same customer.
Price Skimming involves setting prices high while competition is low, during the introductory phase. Prices can then be reduced to stay competitive as competition increases.
Make sure overheads are adequately included in the price of products at reasonable sales volumes.
It is much easier to reduce prices in the future than to increase them. Start high and offer temporary discounts.
Keep your pricing system as simple as possible. This will assist with future price changes.
Penetration strategies aim to attract buyers by offering lower prices on goods and services. While many new companies use this technique to draw attention away from their competition, penetration pricing does tend to result in an initial loss of income for the business.
Psychological pricing is a pricing and marketing strategy based on the theory that certain prices have a psychological impact. Marketers encourage customers to respond on emotional levels rather than logical ones.
For example, setting the price of a watch at $199 is proven to attract more consumers than setting it at $200. The goal of psychology pricing is to increase demand by creating an illusion of enhanced value for the consumer.
Pricing strategy helps you determine the price point at which you can maximize profits on sales of your products or services. Factors to be considered includes:
Costs: Overheads, production and distribution.
Competitors: Offerings and positioning strategies.
Customer: Target customer profile.
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